Can investing in corporate social responsibility lower a company's cost of capital?

2014 ◽  
Vol 31 (2) ◽  
pp. 202-222 ◽  
Author(s):  
Marcelo Cajias ◽  
Franz Fuerst ◽  
Sven Bienert
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Cost Of Capital ◽  
Task Force ◽  
Equity Capital ◽  
Content Type ◽  
Starting Point ◽  
Corporate Social ◽  
The Cost ◽  
A Company

Purpose – This paper aims to investigate the effect of corporate social responsibility (CSR) ratings on the ex ante cost of capital of more than 2,300 listed US companies in a panel from 2003 to 2010. It examines whether financial markets value continuous investment in CSR activities through higher market capitalization and lower cost of capital. Design/methodology/approach – The measure of the cost of capital reflects the perceived riskiness of individual companies expressed in the unobserved internal rate of return that investors expect to hold a risky asset. Based on descriptive portfolio estimations, panel and quantile regressions, the authors model the cost of equity capital as a function of CSR strengths and concerns obtained from the KLD-database and accounting controls. Findings – The authors show that firms' CSR strategies differ significantly across industry sectors. Customer-orientated companies such as telecommunications and automobile outperform asset-driven sectors such as real estate or chemical companies. Furthermore, the authors find a 10-bp positive effect for one standard deviation of firms' intensive allocation of resources in sustainable activities. Research limitations/implications – Since the authors are interested in the effect environmental, social and governance activities have on the firm's perceived market valuation rate, the authors apply the Fama-French model because of its efficiency in explaining realized returns, rather than incorporating analyst's long-term growth forecasts into the proxy for the equity premium. Practical implications – Managers of companies with low or intermediate CSR scores may consider the financial benefits of improving their social and environmental performance. A good starting point is usually to draw up a company-wide CSR agenda, possibly guided by a dedicated CSR task force, mapping out the potential costs and benefits of such measures. In addition, by improving their CSR ratings, a company may get access to additional resources, ranging from the growing ethical investment industry to employees for whom CSR performance matters when choosing an employer. Originality/value – The authors expand the existing literature by considering firm's CSR level to be in relation to the overall CSR performance and decompose firm's CSR agenda into strengths and concerns rather than counting the number of activities a firm is involved in. The applied methodology allows a better understanding of firm's CSR agenda and its implication for capital markets and investors on both long and short investment terms.

scholarly journals Corporate social responsibility disclosure level, external assurance and cost of equity capital

2018 ◽  
Vol 16 (4) ◽  
pp. 694-724 ◽  
Author(s):  
Jessica Lee Weber
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Reference Group ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Content Type ◽  
Csr Disclosure ◽  
Corporate Social ◽  
The Cost

PurposeThis study aims to analyze whether corporate social responsibility (CSR) report characteristics, including disclosure level and external assurance, and reporting firms’ CSR performance, explain variation in cost of equity capital among CSR disclosers.Design/methodology/approachThe study uses a propensity score matched sample of CSR reports prepared according to the Global Reporting Initiative’s (GRI) G3/G3.1 Reporting Guidelines.FindingsOverall, there does not appear to be a difference in cost of equity capital among CSR disclosers based on GRI disclosure level. The exception is for poor CSR performers reporting at the highest GRI disclosure levels, but not obtaining assurance. These firms may be suspected of greenwash and therefore have higher cost of equity capital than the reference group. Poor CSR performers, especially those reporting at the highest GRI disclosure levels, obtain the greatest cost of equity capital benefit associated with external assurance.Originality/valueThis study contributes to the literature by showing that the cost of equity capital benefits associated with CSR disclosure and assurance do not accrue equally to all CSR disclosers. Specifically, this study is the first to provide empirical evidence of the cost of equity capital consequences of suspected greenwashing and empirically demonstrate the role of external assurance in mitigating greenwashing concerns among poor performers.

Family businesses, corporate social responsibility, and websites

2019 ◽  
Vol 121 (7) ◽  
pp. 1442-1466 ◽  
Author(s):  
Lea Iaia ◽  
Demetris Vrontis ◽  
Amedeo Maizza ◽  
Monica Fait ◽  
Paola Scorrano ◽  
...  
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Word Association ◽  
Family Businesses ◽  
Wine Industry ◽  
Added Value ◽  
Content Type ◽  
Italian Wine ◽  
Starting Point ◽  
Corporate Social

Purpose The purpose of this paper is to identify the distinctive elements of CSR communications that characterize the communications models of family businesses in the Italian wine industry, and to compare them with nonfamily businesses. Design/methodology/approach Using a case study approach, a sample of large and medium companies practicing corporate social responsibility was identified. The content of their websites was examined using content analysis and text mining (correspondence analysis techniques and word association analysis using the T-Lab software). Findings The analysis indicates that the ownership structure nature makes a difference in the online CSR communications process. The cultural identity in both family and nonfamily businesses is founded on intangible factors such as tradition; however, being a family business is a fundamental driver in the online CSR communications process, no longer forming a bond among players in the wine industry, but rather linking with other wine family businesses. Research limitations/implications One limitation of this work is the small size of the investigated sample. An added value it contributes is its focus on the Italian wine industry. The paper provides the essential elements that family and nonfamily wine businesses should consider in customizing their CSR communications with the brand’s specific details. Originality/value The authors highlighted the similarities and differences of family and nonfamily wine businesses in terms of their online CSR communications. The authors also observed how the family wine business identity, in its multidimensional construct, has common factors with what we call “familiness.” This research could establish a starting point for further work within this important sector.

Corporate Social Responsibility in hospitality: are sustainability initiatives really sustainable? Case examples from CitizenM, Lefay and Six Senses

2020 ◽  
Vol 12 (5) ◽  
pp. 525-545
Author(s):  
Virginia Maria Stombelli
Keyword(s):  
Sustainable Development ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Decent Work ◽  
Content Type ◽  
Starting Point ◽  
The Future ◽  
Virtuous Cycle ◽  
Positive Direct ◽  
Corporate Social

Purpose In 2016, the United Nations published the agenda for sustainable development with 17 Sustainable Development Goals (UN SDGs), asking everyone to commit to reach the Goals’ targets by 2030. Accordingly, hospitality brands developed Corporate Social Responsibility (CSR) initiatives to deliver positive direct, indirect and induced impacts to the triple bottom lines’ environmental, social and economic dimensions. The purpose of this paper consists in investigating the benefits that companies want to obtain, engaging in these activities. Three very different hotel brands’ CSR are analyzed to consider their undeclared coordination with the UN SDGs namely CitizenM, Lefay and Six Senses. Design/methodology/approach The paper is based on secondary qualitative data retrieved from websites. Findings When choosing to commit to CSR initiatives, companies not only behave as good corporate citizens but also pursue their economic interests. By so doing, they receive benefits that vary from improved image and reputation amongst guests to enhanced satisfaction and commitment amongst employees, passing through reduced fiscal burdens and financial savings. Practical implications The UN SDGs seem to potentially create a virtuous cycle in which Goal 8, decent work and economic growth, must be a leading cornerstone. To make the cycle work, socio-economic engagement and factual certainly should be improved and hospitality companies should pay a role both by measuring and publishing the benefits of committing to CSR and funding sustainability research that can be beneficial to their business, too. If this happens and the UN SDGs’ targets are met, the future will benefit from a circular economy, whereby resources will not be disposed of but maintained, repaired, reused, remanufactured and refurbished before being recycled. In other words, sustainability is not only about creating a better life for every living being but also about developing favourable business environments to benefit companies. Originality/value The comparison of hospitality brands’ with theoretically identified benefits represents the starting point of a wider multi-dimensional reflection on coordination between companies’ CSR and UN SDGs. Recommendations to sustain the sustainability virtuous cycle and to look at the future are drawn.

Recency effects in the buffering of negative news by corporate social responsibility advertising

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Joon Hye Han ◽  
Gary Davies ◽  
Anthony Grimes
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Order Effects ◽  
Content Type ◽  
Recency Effects ◽  
Determining Factors ◽  
Negative News ◽  
Attribution Of Blame ◽  
Corporate Social ◽  
A Company

PurposeDrawing from the theory of how relevant items are processed in memory when making judgements, this study aims to test for recency effects between CSR advertising and related, negative news on how a company is perceived and the explanatory roles of environmentalism, attribution and both feelings and attitudes towards the advertising itself.Design/methodology/approachThis study uses between-subjects experimental design with pretests.FindingsOrder effects exist, which, when ads and news are similarly influential, evidence a recency effect. The process is explained by both the mediating influence of attribution of blame and the moderation of this influence by attitude towards the environment. Differences between the effectiveness of ads are explained by the mediating influence of attitudes towards and feelings about the ad together with the moderation of this influence by involvement in the ad context.Practical implicationsCorporate social responsibility (CSR) ads should be pretested in the context of related but negative news, and not just on their own, to ensure they can buffer such news. CSR ads can be more effective when following rather than preceding such news and should not be withdrawn if such a crisis occurs.Originality/valueThe research first attempts to explain recency effects theoretically from the influence of CSR ads on negative CSR-related news. It also shows the determining factors in how such effects influence consumers by considering attribution, environmentalism, attitude to the context and attitude and feelings towards CSR ads.

Corporate social responsibility, governance and stakeholders: a bank in the upbeat of the crisis

2016 ◽  
Vol 12 (4) ◽  
pp. 388-412 ◽  
Author(s):  
Frank Jan de Graaf
Keyword(s):  
Corporate Governance ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Governance Structure ◽  
Governance System ◽  
Content Type ◽  
Social Responsibilities ◽  
The Social ◽  
Corporate Social ◽  
A Company

Purpose Using the global financial crisis as a critical event and based on institutional theory and stakeholder theory, this paper aims to explore the relationship between corporate governance and corporate social responsibility (CSR). The question is how stakeholders can influence corporate responses to societal change by using their position in the governance structure. Design/methodology/approach The analysis is based on a historical analysis of data collected mainly between 2002 and 2004. The historical perspective enables an understanding of the response of the company to environmental changes. Findings The approach enables researchers to relate the normative component of CSR to specific governance mechanisms. These governance mechanisms are specified in direct and indirect influence pathways. Historical data shed light on how, in the upbeat of the crisis, stakeholders have influenced the principles and policies of the ING Group, a Dutch financial company. Research limitations/implications The paper suggests that stakeholders influence principles – normative assumptions that guide corporate decisions – mainly in dialogue-based meetings (direct influence pathways). Companies are made accountable in indirect influence pathways such as regulations. The author also demonstrates that a historical approach enables an understanding of long-term historical developments and the linking of corporate policies to the normative assumptions of stakeholders. Practical implications If stakeholders wish to assess the social responsibility of a company, then they should assess the governance structure in relation to the principles and policies. The power structure within a company and that within the institutional framework in which the company operates (the governance system) strongly influences how a company executes its social responsibilities. Social implications The paper demonstrates how stakeholders can use the governance structure to influence a bank. If society – or a specific group in society – wants banks to play a different role, this paper points to what could be the levers of change in the governance system and the governance structure. Originality/value Insights into the complex relationship between corporate governance and the processes in which the social responsibilities of a company are developed.

Corporate investment in social responsibility versus dividends?

2012 ◽  
Vol 8 (2) ◽  
pp. 199-207 ◽  
Author(s):  
Michel T.J. Rakotomavo
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Design Methodology ◽  
Corporate Investment ◽  
Cash Flows ◽  
Cost Of Equity ◽  
Content Type ◽  
Corporate Social ◽  
The Cost ◽  
Practical Implications

PurposeThe paper aims to examine whether corporate investment in social responsibility takes away from expected dividends.Design/methodology/approachThe article builds two hypotheses that are tested empirically through the analysis of 17,670 US firm‐year observations covering the period 1991‐2007. The tests are conducted in both univariate and multivariate settings.FindingsThe evidence supports the hypothesis that mature firms tend to invest more in corporate social responsibility (CSR). Specifically, firms investing highly in CSR tend to be larger, more profitable, and with greater earned (rather than contributed) equity. The evidence also supports the hypothesis that CSR investment does not subtract from dividends. Instead, CSR effort and dividend tend to increase together. Thus, CSR investment tends to be effected by companies who can afford it, and it does not lower value by lowering investors' expected payout.Practical implicationsThese results imply that spending resources on CSR does not lower the cash flows paid out to investors. When combined with the finding that CSR lowers the cost of equity, they also mean that CSR increases the value of a company's stock.Originality/valueThis is the first study that explicitly links CSR to the dividend flow.

scholarly journals Biaya Modal Perusahaan di Indonesia: Tanggung Jawab Sosial dan Tata Kelola Perusahaan

2021 ◽  
Vol 26 (3) ◽  
pp. 361
Author(s):  
A. Firmansyah, A. F. Andriyani, M. L. Mahrus, W. Febrian, P. H. Jadi
Keyword(s):  
Corporate Governance ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Hypothesis Test ◽  
Linear Regression Analysis ◽  
Annual Reports ◽  
Corporate Social ◽  
The Cost

The high capital cost indicates the company's risk to obtain funding from debt and equity. The test in this study aims to prove the association between corporate social responsibility and corporate governance with the cost of capital. This study employs data sourced from financial reports and annual reports of the listed companies on the Indonesia Stock Exchange, downloaded from www.idx.co.id. In addition, this research data also employs stock price information sourced from finance.yahoo.com. The sample selection in this study used purposive sampling with a total sample of 260 observations from 65 companies from 2016 to 2019. The hypothesis test in this study used multiple linear regression analysis for panel data. This study concludes that corporate governance is positively associated with the cost of capital, while corporate social responsibility is negatively associated with the cost of capital. This study suggests that Indonesia's capital market supervisory authority needs to improve its governance policies and governance oversight mechanisms for companies listed on the Indonesia Stock Exchange.

Reducing skepticism about corporate social responsibility: roles of gender and agentic-communal orientations

2019 ◽  
Vol 36 (1) ◽  
pp. 189-196 ◽  
Author(s):  
Kevin P. Newman ◽  
Rebecca K. Trump
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Target Market ◽  
Content Type ◽  
And Gender ◽  
The Individual ◽  
Corporate Social ◽  
A Company ◽  
Practical Implications

Purpose Companies are increasingly emphasizing corporate social responsibility (CSR). However, consumers are often skeptical of the sincerity of companies’ CSR claims, particularly when the claim comes directly from the company. This paper aims to demonstrate how to reduce consumer CSR skepticism by examining the role of a company spokesperson’s gender and gender-related characteristics. Design/methodology/approach Two between-subjects experiments with a combined total of 329 participants examined how consumers’ levels of CSR skepticism are affected depending on the gender of the consumer and the gender and gender-related characteristics of the company’s CSR spokesperson. Findings Study 1 finds that a female (vs male) spokesperson generally elicits less CSR skepticism. However, Study 2 expands on this to demonstrate that consumers are less skeptical of a company’s CSR efforts when they are promoted by a spokesperson who exhibits gender-related characteristics that match, or are typically associated with, the individual consumer’s gender. Practical implications Brands often face difficulties in successfully promoting their own CSR efforts to skeptical consumers. These findings should guide companies and their brands in choosing ideal spokespeople for making effective, sincere CSR claims, depending on the target market. Originality/value This research is the first to identify the important role of gender in consumers’ perceptions of CSR sincerity. Thus, it provides practically-oriented strategies that may mitigate a growing consumer CSR skepticism that exists in today’s marketplace.

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